Economic commentary provided by Alberta Central Chief Economist Charles St-Arnaud.
Bottom line
Housing activity eased in February for a third consecutive month. Most of the decline comes from significantly lower activity in Ontario, where the number of housing transactions is at its lowest since the early days of the pandemic. As a result, inventories are rising in Canada to their highest level since the pandemic, leading to some decline in prices nationally
The elevated uncertainty caused by the US tariff threat is clearly holding back the housing market, especially in markets where affordability is very low, and offsetting the impact of lower interest rates. So far, the weakness has mainly affected Ontario, with the number of transactions having dropped by about 30% since November and the month-of-supply measure of inventories at its highest since the financial crisis.
With uncertainty remaining elevated and resulting in a slower Canadian economy, further easing in the housing market is likely in the coming months. However, lower interest rates, better affordability and demography are likely to support some markets. The speed of the slowdown in the housing market will likely be determined by whether weaker growth translates into layoffs and the magnitude of the job losses.
In Alberta, housing market activity remained robust by historical standards. We note that Edmonton continues to outperform Calgary, with the provincial capital amongst the strongest housing markets in Canada. Strong migration into Alberta and affordability are significant supports for housing activity and prices compared to elsewhere in the country.
Activity in the Canadian housing market dropped by 9.8% m-o-m seasonally-adjusted in February, a third consecutive month of decline.The number of transactions, at 37.0k, its lowest level since November 2023, and 7.0% lower than for the same month the preceding years. The decline in activity in January was mainly the result of a drop in activity in Ontario (-20.2% m-o-m), BC (-11.3% m-o-m), Alberta (-6.1% m-o-m) and Quebec (-2.6% m-o-m). On the flip side, activity increased in Manitoba (+9.8% m-o-m), PEI (+7.7% m-o-m), New Brunswick (+4.0% m-o-m), and Saskatchewan (+2.6% m-o-m).
Compared to the average level of 2019, the number of transactions is about 11.8% lower nationally but continues to be well above its pre-pandemic level in Newfoundland (+68%), Alberta (+45%), and Saskatchewan (+44%). On the flip side, activity is well below pre-pandemic in Ontario (-37%) and BC (-11%).
New listings decreased 12.7% m-o-m seasonally-adjusted in February, after a surge in January, and were 4.2% higher compared to the prior year. The decline in new listings was seen in every province, except for Manitoba (+0.3% m-o-m). The biggest declines in new listings were in Ontario (-18.6% m-o-m), BC (-17.3% m-o-m), Quebec (-4.3% m-o-m), and Nova Scotia (-3.4% m-o-m).
Despite sales activity being weaker than new listings in many regions, the month-of-supply measure[1] rose to 4.7 nationally, on par with its 2019 level. Based on this measure, the change inventories at the provincial level were mixed. Inventories rose the most in Ontario, BC, and Alberta, while they declined in Newfoundland, PEI, New Brunswick, Saskatchewan, and Manitoba.
Inventories are the lowest in Manitoba (2.1 months), Alberta (2.6 months), Saskatchewan (3.2 months), and New Brunswick (3.7 months), while they are the highest in BC (7.0 months), PEI (6.2 months), Ontario (5.5 months), Quebec (4.3 months) and Nova Scotia.
Compared to 2019, inventories in Ontario are 3.1 months higher and 1.5 months higher in BC, while they remain well below in Saskatchewan (-7.4 months) and Alberta (-4.3 months)
With a month-of-supply at 2.6, Alberta’s housing market remains tight by historical standards.
With lower sales and higher inventories, the MLS House Price Index decreased 0.8% m-o-m in February. Compared to the previous year, house prices nationally were marginally lower by 0.8% y-o-y.
The biggest monthly price increases were in Quebec (+1.3% m-o-m), Manitoba (+0.8% m-o-m), and Newfoundland (+0.5% m-o-m). Prices decreased the most in Ontario (-1.3% m-o-m), Nova Scotia (-1.2% m-o-m), PEI (-0.8% m-o-m), and New Brunswick (-0.6% m-o-m).
On a y-o-y basis, most regions have seen higher prices, except for Ontario (-1.0% y-o-y). Prices increased the most in New Brunswick (+10.7% y-o-y), Quebec (+8.6% y-o-y), Newfoundland (+8.0% y-o-y), and Manitoba (+7.7% y-o-y).
Compared to their recent peaks in early 2022, prices have declined by 13.9% nationally. However, prices are still about 34% higher than in January 2020 on the eve of the pandemic. Compared to their recent peak, prices dropped the most in Ontario (-17%) and BC (-7.3%). However, prices are higher in New Brunswick (+14%), Alberta (+14%), Newfoundland (+13%) and Saskatchewan (+9%).
In Alberta, benchmark prices were unchanged m-o-m and are up 4.8% y-o-y. Price in Calgary eased 0.5% m-o-m (+2.4% y-o-y) while the increased 1.0% m-o-m in Edmonton (+12.2% y-o-y). Edmonton has been outperforming relative to Calgary for some months. Strong population growth and better affordability could explain the better performance in Edmonton.
In Alberta, the housing market remains robust, with transactions still well above their pre-pandemic level. Nevertheless, the number of transactions has increased in February in most regions compared to the same month last year, except in Calgary (-10.4% y-o-y) and Medicine Hat (-21.5% y-o-y). (see table below for details). On a 3-month moving average of the year-on-year, transactions increased 4.0% in the province, with strong increases in Fort McMurray (+24.5%), Lloydminster (+15.3%), Lethbridge (+15.0%), and Edmonton (14.3%). On the flip side, activity was lower in Calgary (-5.0%), South Central Alberta (+2.9%), and Medicine Hat (-1.6%).
Compared to the average level of transactions in 2019, activity in the province increased by 45%, led by Edmonton (61%), Central Alberta (+48%), Calgary (+41%), and Lloydminster (+34%).
New listings were higher than last year at the provincial level (3.7%). However, there are some significant differences regionally. On a 3-month moving average of the year-on-year, new listings increased the most in Calgary (+10.1%), Alberta West (8.2%), South Central Alberta (+4.3%), and Edmonton (+0.8%). New listings declined the most over the same period in Lloydminster (-11.0%), Medicine Hat (-9.8%), Grande Prairie (-7.3%), and Fort McMurray (-4.1%).
With sales roughly in line with new listings in February, some regions saw a tightening of their housing market while others saw an easing. The primary seller’s markets are Grande Prairie, Lethbridge, Edmonton, and Central Alberta. The main buyer’s markets are Fort McMurray and Calgary.
Average house prices in the province increased by 8.8% on a 3-month moving average of the year-on-year in the province. Prices are higher in all regions, except in Western Alberta (-2.8%). Prices rose the most in Grande Prairie (+15.1%), Edmonton (+11.6%), Lethbridge (+11.3%), and Calgary (+10.4%). They increase the least in Fort McMurray (+1.2%), Medicine Hat (1.2%), Lloydminster (+6.4%), and Central Alberta (+6.5%).
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Independent Opinion
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.